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Tuesday, 22 July 14
INDONESIAN ELECTION RESULT ENCOURAGING FOR FOREIGN INVESTMENT IN ENERGY AND MINING SECTORS - WOOD MACKENZIE
 Joko Widodo-Jusuf Kalla has been announced as the official winner of Indonesia's presidential election. Joko Widodo, or Jokowi, is viewed as a more progressive and pragmatic choice for President than his opponent, Prawbowo Subianto.
Wood Mackenzie says that Jokowi's victory will generate short-term positivity for foreign companies looking to invest in Indonesia's energy and mining sectors. However, the new government's ability to implement reforms remains uncertain. A lack of a majority in the senate will weaken the government's ability to push through all reforms required to reinvigorate the investment environment and contribute to a revived Indonesian economy. The significance of this political development for the mining, upstream oil and gas, and fuel sectors are noted below.
Mining
Jokowi could shift the regulatory environment towards being more accommodating of foreign investment and mining in general. Wood Mackenzie's Senior Coal Analyst Rory Simington explains, "Mining-friendly regulatory change is possible, however it is likely to be incremental rather than exponential." Implications for the mining sector are:
- Current official policies are unlikely to be reversed. These include the ban on mineral exports, requirements for divesture of foreign ownership, and Coal Contracts of Work renegotiation.
- The previous DPI-P led government of Megawati Sukarnoputri from 2001 to 2004 showed a willingness to appoint people from industry instead of politicians to prominent positions in key ministries. If the Widodo led DPI-P coalition government appoints a competent administrator with industry experience to head the Department of Energy and Mineral Resources, this could result in mining friendly changes to the regulatory environment.
- Based on discussions with industry contacts in Indonesia, we believe that changes could include easing of foreign investment divesture requirements, and reducing minimum levels of purity that must be achieved for metals refining before export is allowed. Any changes are likely to be incremental rather than exponential.
Upstream oil and gas
Wood Mackenzie believes the wider implications of the election result will be felt more in the oil and gas sector. Wood Mackenzie's Senior Upstream Analyst, Andrew Harwood says, "At a time of growing domestic energy demand, declining indigenous production, and after several years of regulatory instability, the government's ability to implement Jokowi's proposed reforms will be key." Implications for the upstream sector are:
- Indonesia's crude output has fallen from over 1 million barrels per day in 2005 to currently just over 800,000. The domestic fuel subsidy bill is approaching US$21 billion (bn) in 2014, and regulatory uncertainty has stalled several major investment projects, such as Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion.
- Jokowi has outlined plans to reduce Indonesia's reliance on oil imports by developing new gas infrastructure and accelerating the switch to gas. He aims to boost oil and gas output by providing enhanced fiscal terms for mature fields and exploration, and removing red-tape, which would also apply to the mining sector.
- A revision of the 2001 Oil and Gas Law and formalisation of the upstream regulator's role is a longer term objective that would enhance the investment environment by removing regulatory uncertainty. The sanction of Chevron's Indonesia Deepwater development, Inpex's Abadi FLNG and BP's Tangguh expansion could generate over US$30bn of new investment in Indonesia's oil and gas sector.
- While we would expect PERTAMINA to play a greater role in Indonesia's upstream sector under Jokowi, the new president also recognises the benefits of working with international investors to secure technological know-how as well as investment.
- Overall, Jokowi's victory will generate short-term positivity in the energy sector. However, the new government's ability to implement the proposed reforms remains uncertain.
Fuels market
Sushant Gupta, Head of Asia Pacific Downstream Research, says, "Subsidies are a huge burden to the government because around 60% of the total oil demand is subsidised. During the period of 2014-2020, we estimate the total fuel subsidy bill to be around US$120bn, assuming current domestic prices in Indonesia. This accounts for around three-percent of GDP and is therefore unsustainable." As a result, Wood Mackenzie expects Jokowi's government to make changes:
- The government is expected to push through further price reforms, which will impact near-term demand. However, the income-effect prevails in the medium term and will drive demand growth.
- If subsidies are sharply reduced, we could see a demand drop of around 60-70 thousand barrels per day (kb/d) in gasoline and 45-50 kb/d in diesel.
- The current market size of unsubsidised retail fuels (gasoline and diesel) is very small; however, there is a huge upside potential if the government fully deregulates the market. This would provide a good market opportunity to foreign players operating in the unsubsidised retail fuels market or new players looking to invest in refining and retail sectors in Indonesia.
Editor’s notes:
Wood Mackenzie is a global leader in commercial intelligence for the energy, metals and mining industries. We provide objective analysis and advice on assets, companies and markets, giving clients the insights they need to make better strategic decisions. For more information visit: www.woodmac.com
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Thursday, 10 July 14
SGX EXPANDS ACROSS THE BULKS WITH NEW COAL PRODUCTS
COALspot.com: Singapore Exchange (SGX) is expanding its bulk commodity derivatives offering by launching new coking and thermal coal products on 4 ...
Thursday, 10 July 14
HANDY: SMALL INCREASE; PANAMAX: POSITIVE TONE; CAPESIZE: PAPER VALUES REMAIN WEEK
Handy
It is a general increase in activity in both hemispheres whereas rates have just experienced a small increase. In the Feast we see stable a ...
Wednesday, 09 July 14
SHIP INVESTMENTS ARE TRENDING LOWER
Most ship owners are deeming current ship prices on the high side, refraining from making serious commitments in new acquisitions or newbuilding or ...
Wednesday, 09 July 14
INDIAN GOVERNMENT ADVISED POWER UTILITIES TO INCREASE COAL IMPORTS
COALspot.com: The government of India has advised power utilities to increase coal imports to meet fuel shortages and those that have fuel supply p ...
Wednesday, 09 July 14
PANAMAX MARKET FINALLY CORRECTING UPWARDS; AVERAGE TC MORE THAN DOUBLING WEEK ON WEEK - INTERMODAL
The Dry Bulk market has closed off on Friday on a more positive note, with most segments noting weekly gains and the Panamax market finally correct ...
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- GMR Energy Limited - India
- Ind-Barath Power Infra Limited - India
- Bhatia International Limited - India
- Straits Asia Resources Limited - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Green Power PLC Corporation, Philippines
- Siam City Cement PLC, Thailand
- Vedanta Resources Plc - India
- White Energy Company Limited
- Ceylon Electricity Board - Sri Lanka
- New Zealand Coal & Carbon
- Kumho Petrochemical, South Korea
- Gujarat Sidhee Cement - India
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Semirara Mining and Power Corporation, Philippines
- Economic Council, Georgia
- Antam Resourcindo - Indonesia
- India Bulls Power Limited - India
- The Treasury - Australian Government
- Energy Link Ltd, New Zealand
- Metalloyd Limited - United Kingdom
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- PTC India Limited - India
- Ministry of Transport, Egypt
- Kobexindo Tractors - Indoneisa
- Meralco Power Generation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Uttam Galva Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Thai Mozambique Logistica
- International Coal Ventures Pvt Ltd - India
- Posco Energy - South Korea
- Australian Coal Association
- Latin American Coal - Colombia
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- Merrill Lynch Commodities Europe
- Directorate Of Revenue Intelligence - India
- Petron Corporation, Philippines
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Africa Commodities Group - South Africa
- Savvy Resources Ltd - HongKong
- Binh Thuan Hamico - Vietnam
- Jindal Steel & Power Ltd - India
- Barasentosa Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Semirara Mining Corp, Philippines
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Sinarmas Energy and Mining - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- Eastern Energy - Thailand
- Indogreen Group - Indonesia
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- Sindya Power Generating Company Private Ltd
- Global Business Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Asmin Koalindo Tuhup - Indonesia
- Intertek Mineral Services - Indonesia
- Price Waterhouse Coopers - Russia
- Kideco Jaya Agung - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Parliament of New Zealand
- Independent Power Producers Association of India
- Energy Development Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Rashtriya Ispat Nigam Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- Madhucon Powers Ltd - India
- Chamber of Mines of South Africa
- Sakthi Sugars Limited - India
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- Makarim & Taira - Indonesia
- Central Java Power - Indonesia
- Central Electricity Authority - India
- Deloitte Consulting - India
- Mjunction Services Limited - India
- MS Steel International - UAE
- Miang Besar Coal Terminal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- Timah Investasi Mineral - Indoneisa
- Power Finance Corporation Ltd., India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IEA Clean Coal Centre - UK
- LBH Netherlands Bv - Netherlands
- Aditya Birla Group - India
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Banpu Public Company Limited - Thailand
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Essar Steel Hazira Ltd - India
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Marubeni Corporation - India
- Coalindo Energy - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Ministry of Mines - Canada
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- South Luzon Thermal Energy Corporation
- Neyveli Lignite Corporation Ltd, - India
- Baramulti Group, Indonesia
- Pendopo Energi Batubara - Indonesia
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Agrawal Coal Company - India
- Xindia Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- ICICI Bank Limited - India
- Salva Resources Pvt Ltd - India
- Bharathi Cement Corporation - India
- Cement Manufacturers Association - India
- Indian Energy Exchange, India
- Tamil Nadu electricity Board
- European Bulk Services B.V. - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Tata Chemicals Ltd - India
- Siam City Cement - Thailand
- Dalmia Cement Bharat India
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- Billiton Holdings Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- Eastern Coal Council - USA
- Therma Luzon, Inc, Philippines
- Iligan Light & Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Minerals Council of Australia
- Riau Bara Harum - Indonesia
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- Bayan Resources Tbk. - Indonesia
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- TeaM Sual Corporation - Philippines
- Leighton Contractors Pty Ltd - Australia
- Bhoruka Overseas - Indonesia
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Maharashtra Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Mercuria Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Kapuas Tunggal Persada - Indonesia
- Star Paper Mills Limited - India
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- Trasteel International SA, Italy
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Georgia Ports Authority, United States
- Sical Logistics Limited - India
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Medco Energi Mining Internasional
- IHS Mccloskey Coal Group - USA
- Planning Commission, India
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Coastal Gujarat Power Limited - India
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